As was universally expected, he has kept the official cash rate on hold at 2.5 per cent, citing international conditions, in particular the "real risk that the European sovereign debt crisis could cause a further slowing in global activity" putting downward pressure on export commodity prices and raising funding costs for New Zealand banks over the coming year.

The Reserve Bank has inserted language about "gradually increasing pressure on domestic reassures" into the key paragraph which otherwise reiterates September's guidance that if global developments have only a mild impact on New Zealand it is likely the OCR will have to increase.

The "gradually" might be seen as moderating the tightening bias.

Of the major banks, ANZ National, BNZ and Westpac, are all now calling June as the start of the tightening cycle.

Bollard's statement notes that the domestic economy has continued to expand at a modest pace and that business confidence has fallen back "somewhat".

The National Bank's monthly survey recorded its third successive decline yesterday, though the level remains consistent with a moderate pace of growth.

Domestic indicators have tended to show a fading of the momentum evident late last year and early this year.

Gross domestic product in the June quarter rose just 0.1 per cent, where the Reserve Bank had forecast 0.6 per cent, making an annual rate of 1.5 per cent.

Electronic card transactions, a proxy for consumer spending, grew just 0.5 per cent by value in the September quarter. They had risen more than 2 per cent in each of the two preceding quarters.

Credit growth in the year to August was just 0.8 per cent, indicating ongoing caution on the part of households and businesses despite resilient levels of surveyed confidence.

It suggests households are taking advantage of the lowest mortgage rates for 40 years to repay principal and build up equity rather than taking the opportunity to trade up and gear up.

Turnover in the housing market has flattened off, though prices continue to creep up.

Net migration flows have been negative for six of the past seven months, making a gain just 770 for the year when the long-run average is 12,000.

Crucially for an inflation-targeting central bank, the September quarter consumers price index released on Tuesday was a positive surprise, coming in at 0.4 per cent for the quarter, when the Reserve Bank, like the consensus among private sector forecasters, had been expecting 0.7 per cent.

This will have boosted the bank's confidence that when last October's GST increase drops out of the numbers the annual rate will be safely back within its 1 to 3 per cent target band and the danger of inflation expectations becoming inflamed will be low.

The rebuilding of Christchurch is expected to create inflationary conditions in the construction sector.

But offsetting that Prime Minister John Key is talking about campaigning on a "very, very, very austere programme."

It all leaves little on the domestic front to distract Dr Bollard form fretfully watching the international news flow .

Brian Fallow is the New Zealand Herald's economics editor. A Southlander happily transplanted to Wellington, he has been a journalist since 1984 and has covered the economy and related areas of public policy for the Herald since 1995. Why the economy? Because it is where we all live and because the forces at work in it can really mess up people's lives if we are not careful.